Vital rail line gets one-year reprieve

Looking forward to
possible economic development in the South County, the Lassen County, Calif.,
Board of Supervisors, Union Pacific and Lassen Valley Railway, an affiliate of
V&S Railways, reached an agreement that will save the Wendel/Flanigan rail
line-a piece of infrastructure that could prove invaluable in the future-for at
least one year, the Lassen Valey Times reports. Union Pacific, the current owner of the 21.77 miles of rail
line, abandoned it in 2007, and planned to sell it for salvage and dispose of
the property.

In May, the Lassen County
Board of Supervisors asked UP for a 60-day extension to allow the county to
develop an offer to acquire the line. The county said it is not interested in
owning or operating a railroad but is interested in preserving the line as an
important part of the area's future plans for economic growth. UP granted the extension, and LVR agreed
to purchase the rail line and real estate for $2.3 million, the selling price
UP offered to the county. Railroad Industries, Inc. recently appraised the line
at $2.6 million.

A .57-mile remnant of the
Susanville line at Wendel and approximately 5.3 miles of yard and sidetracks at
Wendel also will be included in the deal.

"This is not the first
effort to acquire the railroad line between Wendel and Flanigan," said John
Ketelsen, county administrative officer. "The Honey Lake Power Company tried to
acquire it last year ... We've met with Honey Lake Power and a potential
developer of a meat packing plant who's urging the county to preserve that
line."

Ketelsen said LVR
indicated its "willingness to put up their money to acquire the railroad and
hold onto it for at least a year. Their idea being either they can salvage it
if nothing comes together with potential shippers or operate it or contract
with the shippers to operate the line should it become economic to do so."

But while LVR will invest
its capital to save the line, its future depends upon those who are interested
in using it.

Ketelsen said he received
an e-mail from LVR describing the rail company's plans.

"A year after purchasing
the railroad line from Union Pacific Railroad," Ketelsen said the e-mail read, "LVR
will make a determination as to whether it wants to continue the ownership of
the railroad line. This analysis will be based in large part on the progress of
each shipper in the development of a plan to utilize the rail service."

Should LVR decide to
divest the line, it would give the shippers an opportunity to purchase it for
the original purchase price plus 5 percent or the current market value,
whichever is higher.

According to the report
by Railroad Industries, Inc., Honey Lake Power has been interested in acquiring
the line for move than five years to bring biomass fuel to the plant, "However,
to date there has been another solid customer on the line, making the rail
rates for handling this material uncompetitive with truck (rates)."

But RII sad an aggregate
quarry in the area has expressed an interest in rail shipping if the
transportation can be cost effective.

In addition, Sierra Army
Depot is located on the line and has its own spur.

The RII report noted the
rail line's value to future economic growth in the area.

"If it (Lassen County)
can preserve the rail line now, it holds the door open for new industries to
locate there now and in the future," the report noted.

"This line is in overall average to good
condition and could handle a train today," RII wrote. "The line has been
formally ‘pulled apart' to mark it as inactive, which would need to be
realigned before operating a train, but the condition of the line is sufficient
for operations. The yard at Wendel would need some work if it were to be used."

According to a letter
from UP to the supervisors, the operator of the line would need to construct an
interchange track at Flanigan. While the operator would charge its rates
between Wendel and Flanigan, UP would "establish and collect the rates it needs
on its lines beyond Flanigan.

The county and any
prospective operator must form their own opinions as to the viability of the
line to be purchased. UP makes no representation at this time about its service
availability and frequency at Flanigan."